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Thursday, December 17, 2015

New Budget Deal Takes a Bite Out of Obamacare. Beginning of the End of the Cadillac Tax & Other Tax Moratoriums

Earlier this week, Republicans and Democrats in congress agreed to a new budget deal that will have significant impacts on PPACA. This is a quick rundown of how the the Consolidated Appropriations Act, 2016 and the Orwellianly named, Protecting Americans from Tax Hikes Act of 2015 (I feel better already) will impact Health Reform. The Cadillac Tax, set to begin in 2018, is now delayed to 2020. This tax is done. I've said that many times over the years and this was just the first official step in that process. President Obama was never going to sign a bill repealing it, but businesses began cutting back on health plans in preparation for it. In this compromise, President Obama can avoid the embarrassment of repealing it while businesses don't have to start making the unpopular cuts associated with it.

Just in case it is not delayed again or repealed, Republicans were able to get Democrats to agree to make the penalties associated with the tax deductible as business expenses. This alone substantially weakens the impact of the Cadillac Tax.

This two-year delay means that health plans (ultimately insureds) get to keep about $3 billion more of their money in 2018 and another $6 billion in 2019 according to the Congressional Budget Office. It also means that in order to keep Obamacare, we need to borrow that $9 billion from China, Japan and the Social Security Program. Go ahead and add it to our tab, we're good for it!

The Health Insurance Provider Tax and Medical Device Tax won't be collected in 2017 as part of a one year moratorium. This is just an odd compromise. These taxes have both been in effect since 2013. Again, I suspect the logic was that Obama would not sign a full repeal, but would sign off on a one year reprieve. Hence, the cost of family coverage will be about $530 less in 2017. Individuals will save about $170 in 2017. And the price of Obamacare goes up about $12 billion in return. That gets tacked onto our national debt.

Permanently nixing all three taxes (Cadillac, insurer and medical device) would save taxpayers at least $253 billion through 2025, according to the Congressional Budget Office.

Rubio's "Truth in Government" Risk Corridor Funding Limits Remain in Place for Another Year. This spending bill will, once again, limit funding of the risk corridor program to the fees that the program collects from insurers that have excess profits. This was how Obamacare was originally sold to the public. In 2014 Senator Rubio insisted that the program retain that aspect of neutral funding in the face of an avalanche of changes to the law that threatened to increase the overall cost of PPACA.

His prognostication was correct. The government's projections were so far off that insurers got back less than 10% of the losses for which they anticipated reimbursement. Many assumed that federal bureaucrats would simply rob Peter to pay Paul and pay out these losses from other funds. Hence, this became known as an "insurer bailout" program. But thus far it has not been and won't be again in 2015.

No Unconstitutional IPAB "Death Panel" In 2016. The new budget bill also guts the Independent Payment Advisory Board temporarily in 2016. The IPAB was supposed to be a panel of "experts" (aka, unelected bureaucrats) who would recommend binding spending cuts in Medicare to help pay for PPACA. IPAB has not yet been established. And this bill makes it almost certain it will not be in 2016. PPACA does, however, give the HHS Secretary authority to take action for the IPAB if it cannot make recommendations so this battle is not yet over.

PPACA is changing as rapidly as ever. More importantly, the recent changes are legislative as opposed to many of the extra-constitutional administrative and Presidential changes we saw in 2013 and 2014. Just yesterday, Democratic presidential candidate Hillary Clinton said President Obama's healthcare is pushing people into part-time positions. She and many Republicans are eager to address that issue by redefining full-time to be 40 hours a week as opposed to 30 or some other significant change to the employer mandate. We will continue to see substantial uncertainty until we know who the President will be in 2017.